How to break bad spending habits especially impulse buying

Avoid the consumerism trap is one of the most important step in achieving my early retirement. The way to do this systematically is to break my bad spending habits. To come up with a solution, I studied how habits are formed and try to come up with ways to stop them.

Habits are formed from a variety of reasons. The most common for me is: (i) laziness and (ii) positive feedback loop.

Laziness caused bad habits to form

Many of us have habits to avoid overloading our brains with daily decisions. That is why we do most of our daily stuff on autopilot. To break bad spending habits, we need to first know what daily things we are doing that is bleeding our money away. For me, it is the following:

  • Taking cabs because I am too lazy to wake up and take the train
  • Eating out at retaurants because I am too lazy to think of cheap and good eating places

Breaking bad habits that are due to laziness is rather simple. Just take some time to see how to reorganise your life so that your laziness doesn’t cause you to spend money needlessly. For me, it was:

  • Engineer my waking hours to be half an hour earlier to avoid taking the cab
  • Spend a day to come up with a list of cheap and good eating places so that I can always refer to it when I need it

These two simple solutions are saving me hundreds of dollars every month so I am sure it will work for you too!

Positive feedback loop

Some habits are hard to break because of the positive feedback loops which feeds into the brain and causes tiny pleasures.Checking email is one good example of this positive feedback loop. When an email comes in, you receive a notification. You check the email and the inbox becomes empty. The empty inbox creates a sense of order which gives a tiny pleasure to the brain. The brain then looks forward to the next notification so as to enjoy the tiny pleassures of clearing your inbox again.

Imagine such positive feedback loop being incorporated into our bad spending habits and you can see why they are so hard to break. This effect can be obviously seen in activities such as shopping. Let’s say you shop as a way to relax after work. When the end of the day comes, it acts as a form of notification to the brain. Then you shop and gain a little pleasure when you buy something. This little pleasure acts as an incentive for the brain to look forward to the next notification. So, when the next end-of-the-day comes, you feel an impulse to shop again.

To break these loops, you need to find a replacement. My solution was to replace spending with saving. Rather than spending the money, I create a physical action of depositing whatever amount of money I was going to spend into another account. The increase in my bank account creates a tiny pleasure for my brain. When the urge to shop arises again, it becomes a notification for my brain to anticipate the pleasure of seeing my bank account increase again.

So, to break bad spending habits, you need to engineer positive feedback loops into other behaviors that restrict the use of money.


Bad spending habits are often the result of some psychological shortcuts that governs how our brain functions. After learning after my way of breaking bad spending habits, what is your solution?

Leave a Reply

Your email address will not be published. Required fields are marked *


My early retirement goals for 2013

Regular readers of this blog will know about my early retirement plan. Each retirement option that I have laid out in my plan requires an extensive period to realise. For example, option A of my plan is to wait for my condo to appreciate in price from 1.7M to 2.5M so that I can sell […]

How much to retire in Taiwan

I was on vacation last week to Taiwan, which explains the lack of posts. During my trip, I took a mental note of how much things cost in Taiwan so that I can calculate how much I need to retire there. In fact Taiwan is going to be my first stop after retirement as my […]